In Part 1 of this series on procurement’s key performance indicators (KPIs), we discussed how legacy KPIs need to be augmented to help procurement expand its value proposition. In this second installment of the series, we’ll focus on how to build a balanced “360-degree” procurement scorecard and highlight some truly KEY performance indicators that help foster the right behaviors and alignment across the source-to-pay (S2P) process and the broader value chain.
Everyone knows the old adage, “What you measure is what you get.” Known as the “Hawthorne Effect,” it has been shown that performance will improve when those performing the process know they’re getting measured on it. So, designing stakeholder-specific KPIs is critical to ensuring business alignment. The “SMART” (specific, measurable, achievable, relevant and timely) metrics model is an excellent framework to apply here. Still, the first step is ensuring a 360-degree measurement system that aligns procurement with:
Pierre Mitchell, Spend Matters’ Chief Research Officer
We live in a dynamic world where billions of people make billions of choices daily. The sheer multitude of choice makes it increasingly difficult to have shared experiences – those kind of global watershed moments that push change and innovation forward at an accelerated pace. Covid-19, in its own terrifying way, stopped us all and immediately narrowed our choices. But it also gave us one unified experience and one unified goal: Fight the virus, stop the spread.
A true global watershed moment had arrived. Suddenly, the whole world understood the importance of the supply chain. Procurement had been thrust onto center stage, and the spotlight was both harsh and illuminating.
Spotlight on Procurement
There’s no way to plan for every outcome. There just isn’t. No risk plan can predict the future with 100% accuracy. There’s no judgement to be laid at anyone’s doorstep. The impact of COVID-19 wasn’t something supply chain professionals could have easily seen coming. So, as the whole world watched the demand for certain products like N-95 masks, PPEs, disinfectant and toilet paper soar, they also saw the dramatic consequences of supply chains that weren’t built for pandemic-driven demand.
The links between the supply chain and business continuity, between business continuity and employment, between employment and economies, those links were now on stark display for everyone to see. Interdependencies that were once just the language of procurement professionals had become the common language of the world.
Chris Haydon, President, SAP Procurement Solutions
At the SIG Procurement Technology Summit, attendees will experience the latest procurement technology in a virtual Innovation Hall. These companies are using artificial intelligence, machine learning and robotic process automation to elevate the role of procurement, ignite innovation and impact the world.
Featured here are company overview, solution overview, and company approach and process to help you learn more about the following virtual Innovation Hall technology providers:
There’s no question that companies are turning to technology to manage many facets of their operations, and procurement is no different. Adopting a technology platform to manage one business unit can result in positive changes, reducing costs and increasing efficiencies. But what happens when a company decides to go through a complete agile and digital transformation?
Our client, College Board, decided to undertake such a sweeping change, and while they’re still on their journey, they are seeing positive outcomes across the organization. About five years ago, College Board saw successive changes in leadership with a new CIO coming in, followed by a new CPO. When they joined the team, College Board had disjointed technology – no department could communicate with another. So, the decision was made to jump into the deep end and take on a complete agile and digital transformation.
Building a Movement
The agile transformation, which would ultimately lead to the digital transformation, required a culture change at College Board. They knew behaviors had to change, both individually and companywide. There was a serious need for collaboration and cross-functional teams to remove the silos each department was in, which could be fostered by new technologies.
And College Board’s 1,800 employees and 250 contractors had to be on board. So, it all started with leadership. The organization’s forward-thinking CIO and CPO laid out clearly defined goals and strategies. Setting the example that this would be successful went a long way in encouraging employee buy-in.
What is your role and your day-to-day responsibilities?
I am head of WNS’ Procurement Services Business Unit. We support procurement organizations globally across all industries. In my organization, there are over 3,000 procurement professionals in 53 locations across the globe. We touch over $85 billion in spend globally and provide a wide range of services. Clients partner with us to operationalize their procurement function and improve financial performance and efficiency.
My responsibilities are broad, I spend most of my time running our business, engaging my team, focusing on building a stronger organization, meeting with clients and industry leaders, and solutioning. But I am always happy to roll up my sleeves and jump into any project. I am passionate about expanding procurement’s influence and helping our clients boost their performance.
Twelve years ago, I started Denali Sourcing. As a procurement professional myself, I know what our clients face daily. I’ve been asked to deliver on similar mandates and create value for the business that goes beyond cost savings. I founded and grew Denali Sourcing Services into a leading global procurement services organization and then joined WNS as part of our acquisition in 2017. In my current role, I work with a larger and more global client base. The evolution of the last decade has proven to me the significance of the value that procurement adds to the business, regardless of industry. I’ve always known that procurement was a huge value-driver, but I needed time to prove it.
Now, I am helping procurement organizations think about ways to transform operating models and enhance the procurement ecosystems across our entire client base. This includes helping companies with any of the following:
What is your role and your day-to-day responsibilities?
I have been CPO at several global companies, where I had responsibility for all procurement, sourcing, P2P automation, as well as global real estate and facilities. I’m currently the President of Collabra Consulting, providing support to clients for procurement, sourcing, cost reduction initiatives, vendor risk management, advisory projects and interim leadership.
What is something that you wish more people knew about sourcing and procurement?
It’s exciting! Sourcing and procurement are mission-critical business activities and done well, they can provide significant bottom-line impact, strategic support, and risk and governance controls to a company.
In this introduction to KPIs and related considerations, we’ll examine not only which KPIs matter, but also how to use them and expand them to support procurement’s broadening role — and also how certain KPI approaches can mislead.
Procurement leaders know that managing spend (what you pay) and supply (what you get) is much more than tactical efficiency improvements and short-lived price reduction efforts. Enabling this procurement evolution requires a balanced scorecard to measure procurement contribution and key performance indicators (KPIs) that quantify the return on investment (ROI) of current procurement processes and also new and improved processes that are increasingly powered by emerging digital capabilities.
In this introduction to KPIs and related considerations, we’ll examine not only which KPIs matter but also how to use and expand them to support procurement’s broadening role — and also how certain KPI approaches can mislead.
What’s the problem with KPIs?
When measuring procurement’s value contribution to the business, the first questions to raise are these: (i) What KPIs should I use (ii) and why?
Although year-on-year purchased cost reduction has been a key historical value proposition of procurement, companies can't "save their way to zero." As businesses are evolving and digitally transforming, procurement organizations must also transform their KPIs to not just measure legacy procurement processes (or procurement services), but to also guide the transformation efforts themselves and build better procurement scorecards that reflect how procurement can enable broader business objectives.
Pierre Mitchell, Spend Matters’ Chief Research Officer
As a procurement professional, you know that talent in procurement has been a hot topic in recent years. Here at WNS-Denali, we have seen more organizations grapple with talent issues, so we decided to dive deeper into the key talent concerns for retail companies at SIG’s Global Executive Summit last fall.
The all-star packed panel with procurement leaders from some of the largest retail brands in the world came together to such questions as:
How does your hiring profile differ now and why?
Where are you finding your talent?
What are you looking for in new hires?
Specialist or generalist, which is a better hiring strategy for your team?
Even if you work at a company beyond the retail industry, these questions and the learnings from the panel still apply to your company. As you strive to gain a competitive advantage and influence more spend strategically, refreshing your approach to talent can make a big impact. Below are the top seven creative hiring strategies that came from our panel of retail experts.
Hire from within
This classic retail trick applies to all industries. Promoting from other areas of business up into a corporate role brings a wealth of knowledge and perspective on the core business and ability to relate to stakeholders. Most importantly, it will add a level of credibility to your procurement team.
David Gonzalez, Director, Procurement Services, Denali - A WNS Company
SIG University Certified Intelligent Automation Professional (CIAP) Program graduate Daryl Hammett discusses the three key questions organizations should ask when framing technology decisions in procurement functions to best suit their business needs.
While legacy resource planning systems are key to all global supply chains, they are also cumbersome, expensive and not designed to support the type of relational data businesses deal with to drive decisions.
Procurement organizations are thinking more often about innovating old processing systems. What areas have inherent risks in innovating? To what degree do we change? How do we manage it? Who do we get involved? A lot of attention is focused on getting the results from innovation and change, especially those associated with people. Most companies have implemented procedures to manage and grow innovation, but I believe one of the most under-analyzed risks in innovation, and one that could be the biggest threat going unaddressed today, is the risk of group think in implementing change in procurement teams.
Michael van Keulen is Chief Procurement Officer at Coupa. He formerly served as the Global Procurement Director at lululemon athletica inc. (NASDAQ: LULU), a $3B+ designer, distributor, and retailer of technical athletic apparel. Previously Michael served as the Procurement Director at VF Corporation (NYSE: VFC), a $12B+ lifestyle apparel and footwear company. Michael is known for leading procurement transformations that generate significant shareholder value.
You have a passion for sourcing talent and developing high-performing teams. How is your approach different than others?
I’m not claiming my approach is different or unique. When hiring, I look for attitude first and procurement experience second. I always say procurement is a seven-step process that can be taught to anyone. What is difficult (if not impossible) to teach someone is to be “naturally curious” and “passionate” about the profession. Procurement is about being bold, going outside the comfort zone and challenging the status quo. This mindset requires people who have high EQ, are agile and not afraid to make mistakes. These traits are even more important when going through a transformation from tactical/operational to strategic.